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Kato (since their beginnings) always had fairly low-flange wheels. Not sure if replacing the old Kato with new Kato wheels will solve the problem. Actually, as far as passenger car wheels go, the ones that Katos sells now, are the same as they put in their passenger cars for decades. Unlike the Diesel wheels which are now closer to fine scale (narrower tread and low-flange).
That's not quite accurate - the original run of Budd cars had deeper flanges than cars manufactured after that. Not much, but enough that they bump Atlas code 55 just a bit.I can't remember if the original 6 and 4 car sets of smoothside cars had this problem or not....